With the CARES Act expected to provide an estimated $591 billion in tax relief in the next ten years, every industry is wondering how they can benefit from this.  The suspension of the 7.5 air transportation Federal Excise Tax (FET) for commercial operations from March to December 2020, such as charter flights, has led to a discussion on whether this should be extended to other areas, such as trucks and trailers.

Several stakeholders, including the American Truck Dealers (ATD) and more than 116 interested organizations, are pushing Congress to suspend the 12% federal excise tax (FET). The U.S. instituted the FET in 1917 as a means to fund World War I. Since then, it has grown from 3% to 12%. Most people feel that abolishing this tax would help the economy recover.

How the Federal Excise Tax Suspension Could Affect the Equipment Industry

According to a survey conducted by CCJ, many carrier organizations canceled their truck (23%) and trailer (17%) orders citing the current unfavorable business environment. Moreover, 60% of those who withdrew their orders say that they have no intention of buying again this calendar year. However, in their recent study, the American Truck Association reiterated that more than half of these carriers would most likely add new trucks/trailers to their fleets if the FET were to be suspended.

The elimination of the federal excise tax (FET) would boost the equipment industry. It would incentivize carriers to invest in new, cleaner, and safer emission trucks. The increased demand for new trucks will mean that the manufacturers have to produce more, thereby creating more jobs.

Additionally, when the number of trucks and trailers increases, the delivery of critical medical supplies will be more efficient. The trucking industry employs around 7.8 million Americans. This means a further delay in FET suspension could result in a significant percentage of these individuals losing their jobs.

A tax holiday on the FET would be an excellent way to assist and restore the equipment manufacturing industry. It could also help to jump-start the economy. Getting rid of the FET will allow more customers to upgrade their machinery. Additionally, it would aid in achieving the overall goal of reducing harmful emissions and improving highway safety.

While the CARES Act may be offering manufacturers loans and grants, this might not be enough. If the government is serious about economic recovery, FET elimination could be a great way to boost the economy. It could even increase trucking equipment sales by up to 10%.

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